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Friday, March 1, 2013

The making of India's budget

As winter takes hold of northern India at the end of every year, in New Delhi's corridors of power, a well-oiled bureaucratic machine moves into a higher gear, in preparation of India's annual Budget, perhaps the country's most important yearly statement.

But the making of India's Budget — a complex, expansive set of documents that details the country's income, expenditure and economic policy, among others — actually begins late into the fall, with the issuance of what is known as the Budget Circular in September.

That single document remains essentially static in its form and content, and informs each department and ministry in the government of India to begin work on estimation of its expenditure and, in some cases, the revenue generation for the coming year.

Specific deadlines are mentioned by the Finance Ministry's Budget Division, the key administrator of the entire process — and unusually for a government and bureaucracy often accused of lethargy, these deadlines are mostly met.

On the expenditure side, all public sector undertakings (PSUs) are brought in dialogue, along with their respective ministries, the Planning Commission and, of course, the finance ministry officials to churn out the Internal and Extra Budgetary Resources (IEBR).

The Planning Commission, in fact, is the main agency through which all discussions on the 'Plan' expenditure, or the Gross Budgetary Support, in government parlance, are held, while the Finance Ministry helms the activity on the 'Non-Plan' side.

But that's only one part of the process.

The government also needs to figure out how much resources it will be able to raise, and part of this is done through the Budget Circular. On the other hand, crucial tax estimates are tricky business, and two specialised divisions within the Finance Ministry's Revenue Department are tasked with producing these numbers. Suggestions on the country's tax framework are also thrown up, and duly considered by the core Budget Team, comprising the Finance Minister, a clutch of secretaries of the Finance Ministry as well as the Chief Economic Advisor.

It is also this team that pours over the 'Blue Sheet', a secret summary sheet of the Budget that is constantly updated with the major numbers, but very closely guarded. These numbers, as the New Year settles in, are slowly finalised. Through January, the Finance Minister not only continues to meet with the core Budget team and others such as the Prime Minister and Planning Commission deputy chairman, but also other stakeholders including industrialists, agriculturists and trade unions.

Yet, the great balancing act that is central to the Budget is no easy task.

Although, as former Finance Ministry bureaucrats attest, the entire Budget process runs like a well-oiled machine, a week before the Budget is presented in Parliament, it moved into a higher gear. Over a 100 officials are willingly quarantined inside the Finance Ministry's basement in New Delhi's North Block, where the Budget press is located to ensure the absolute secrecy of the documents. For almost 10 days, these officials live and work in the basement, with no contact with the outside world, except one telephone that receives calls, that, too, monitored by the Intelligence Bureau, which is tasked with the ministry's security.

In such a 'war-like' atmosphere, the Finance Ministry begins work on the Budget speech that will be read out on the floor of the Parliament, but each minister differs in his or her style. Some consult bureaucrats and their Chief Economic Advisor assiduously, while others just write it out on their laptop and pass on the pen drive to the mandarins.

In either case, copious copies of the speech and the remaining documents must be ready by the morning of February 28, when they are counted, trucked to the Parliament and then counted again before delivery. But the core Budget team embarks on a different journey, travelling through the Rashtrapti Bhawan to meet the President, before settling in for an unusual Cabinet meeting in the Parliament.